Do I have 100, 150, 200? Give me 220, 250, 300. Sold for 306.95 to the trembling investor in the back with no shirt on.
It seems like these days it is impossible to have a day when the nightly news doesn't report a move of more than 100 points on the Dow Jones Industrial Average that day. These sessions are getting difficult to stomach even for an experienced professional who has been taught of the swings of the market. Being told that these ups and downs are expected doesn't give much solace to an investor who just witnessed 10 percent or more of their life savings evaporate in the course of a few months.
So what is an investor to do? Well, the first thing to do is stay calm. One of the biggest mistakes the average investor makes in a period like this is simply selling everything and putting their investment in a savings account or under the mattress. The reality for most is that the bulk of the savings they have has highly appreciated because of that same volatile market. It is not the time to give up on it.
If the market lately is making you nauseous, it's probably time to review the allocation of your portfolio and adjust it to a more appropriate risk level. Proper allocation based on your tolerance is key to any portfolio. People that can only handle upward swings in the market shouldn't have their money in riskier growth stocks. Investors who stay up every night worried about how much they might lose tomorrow should consider purchasing investments with available safeguards that would allow them to stay invested in the market but purchase insurance on their life savings. Granted, these types of investments cost more, but if you're worried, it is probably a justifiable expense for peace of mind.
Another consideration might be a simple strategy utilizing a combination of fixed investments and variable investments. By implementing this strategy an investor could take a large portion of their money and purchase a fixed interest investment and invest the smaller portion in the market. Here's an example:
Let's say you have $100,000 in retirement savings and you learn of an investment offering 6 percent guaranteed for five years. If you were to take roughly $75,000 of that savings and invest it in the fixed investment, you could invest the remaining $25,000 in anything you wanted, regardless of risk. You would be able to sleep at night knowing that the fixed account starting at $75,000 would grow back to your original $100,000 in about five years at that rate. Whatever the remaining $25,000 did in the meantime would be all profit from where you started after five years. Obviously, this is a rough example, but the general idea is very viable and used by many investors today that are leery of the fluctuating value of their savings. The bottom line is that you need to be able to sleep at night. There are tens of thousands of investments to choose from and there is a strategy that is right for every investor. If you're not enjoying your life because of what your investments are doing, you're probably in the wrong investment for you.
It seems like these days it is impossible to have a day when the nightly news doesn't report a move of more than 100 points on the Dow Jones Industrial Average that day. These sessions are getting difficult to stomach even for an experienced professional who has been taught of the swings of the market. Being told that these ups and downs are expected doesn't give much solace to an investor who just witnessed 10 percent or more of their life savings evaporate in the course of a few months.
So what is an investor to do? Well, the first thing to do is stay calm. One of the biggest mistakes the average investor makes in a period like this is simply selling everything and putting their investment in a savings account or under the mattress. The reality for most is that the bulk of the savings they have has highly appreciated because of that same volatile market. It is not the time to give up on it.
If the market lately is making you nauseous, it's probably time to review the allocation of your portfolio and adjust it to a more appropriate risk level. Proper allocation based on your tolerance is key to any portfolio. People that can only handle upward swings in the market shouldn't have their money in riskier growth stocks. Investors who stay up every night worried about how much they might lose tomorrow should consider purchasing investments with available safeguards that would allow them to stay invested in the market but purchase insurance on their life savings. Granted, these types of investments cost more, but if you're worried, it is probably a justifiable expense for peace of mind.
Another consideration might be a simple strategy utilizing a combination of fixed investments and variable investments. By implementing this strategy an investor could take a large portion of their money and purchase a fixed interest investment and invest the smaller portion in the market. Here's an example:
Let's say you have $100,000 in retirement savings and you learn of an investment offering 6 percent guaranteed for five years. If you were to take roughly $75,000 of that savings and invest it in the fixed investment, you could invest the remaining $25,000 in anything you wanted, regardless of risk. You would be able to sleep at night knowing that the fixed account starting at $75,000 would grow back to your original $100,000 in about five years at that rate. Whatever the remaining $25,000 did in the meantime would be all profit from where you started after five years. Obviously, this is a rough example, but the general idea is very viable and used by many investors today that are leery of the fluctuating value of their savings. The bottom line is that you need to be able to sleep at night. There are tens of thousands of investments to choose from and there is a strategy that is right for every investor. If you're not enjoying your life because of what your investments are doing, you're probably in the wrong investment for you.
Curtis Porter is an investment adviser representative with Gemini Services Group of Londonderry, N.H.
